An Experimental Examination of the Economics of Information

Abstract

This article presents an experimental test of propositions that come from Stigler's classic economics of information theory. It reviews previous empirical evidence for the propositions and discusses the mixed support provided for the theory. It also discusses a major assumption of the theory and presents hypotheses that suggest that the propositions are not as universal as has been thought. The results indicate that buyers with more certain beliefs about retailer-price images search less and are less responsive to changes in the costs and benefits of search than buyers with less certain beliefs. Finally, the article discusses the implications of the results for both economics and marketing.